US has barely shown up to trade war: DiMicco

In a letter to the editor, "China steel overcapacity complaints problematic" (amm.com, June 24), Thomas Graham advocates a U.S. trade policy of appeasement and surrender. His attempt to equate our behavior with Chinas shows a complete lack of understanding about the massive support the Chinese government gives its industries and the way that support distorts global trade.

First, the U.S. should be wary of Chinese ownership of U.S. companies. Chinas major industries are state-owned enterprises and that has serious implications for the type of industries in which we would allow them to invest. But more importantly, why would we welcome Chinese companies with open arms when they deny foreign ownership? Unfortunately, we may be about to do that. Shuanghui International Holdings Ltd. has announced it is purchasing 100 percent of Smithfield Foods Inc., while Ford Motor Co. and General Motors Co. are allowed to hold only limited stakes in their Chinese joint ventures.

When it comes to currency, Chinas manipulation of the yuan is a completely different animal than our Federal Reserves efforts to keep liquidity in the market and interest rates low. In the mid-1990s, China devalued its currency and pegged it to the dollar so its currency would rise and fall with ours. This drives their exports and makes imports into China more expensive. Illegal currency manipulation has resulted in a $315-billion U.S. trade deficit with China, the largest trade deficit we have ever had with a single country.

Finally, comparing Chinas support for its state-owned industries to tax incentives American businesses get is truly comparing apples and oranges. Chinese government support is total: a manipulated currency, free land, energy and export subsidies, ownership restrictions, low- and no-interest loans, and import restrictions and taxes. That is hardly comparable to a local or state government incentive package, most of which are tied to performance measures and time limited.

The reality is that we have been in a trade war with China and have never bothered to show up. The American public knows China cheats, but our policymakers are afraid to challenge Chinas routine violations of its commitments to the World Trade Organization­commitments that granted it access to our open markets. China will not change in the face of our continued weakness. Until we choose to fight, we have little chance of achieving the kind of economic growth required to put more Americans back to work and sustain the middle class.